Re: Oil....Gold prices Will Go Up This Week!
Back to the scientific aspects of oil...
There's no need to worry about the end of the world when we use the last drop. The world will NOT run out of oil within the lifetime of any of us or our children. What we are facing is not enough oil to carry on busines as usual. A devastating blow indeed, but not a situation of no oil at all.
Why?
Oil fields don't stop flowing like petrol stops flowing from a car's tank when it's empty. They slowly lose output more like a torch battery going flat. For example, Bass Strait production peaked in 1985 and is now down over 60% from that peak. But it is still flowing, just not as quickly, and it will still be flowing in another decade but it will be slower than it is now.
Why?
Two reasons. When an oil field is first developed each well will flow at full rate because it's new. But there aren't many wells producing yet. So production rises as more wells and infrastrucure is brought online.
But then the older wells start to produce less oil. Production is still rising due to the new wells, but it takes more and more new production to offset the declines from the older wells. A point comes where the diminishing number of new wells coming online (because the discovery and development job is nearing completion) can no longer offset the declines and production starts to fall. And it keeps falling despite a few new wells coming onstream and the occasional new discovery (like the new projects in Bass Strait or the Cooper Basin). The occasional step forward followed by another two steps back.
In additon to the differing number of wells in production, the wells themselves lose flow rate over time as pressures reduce. To some extent technology has helped, but overall in a field you still slowly lose production capacity just like the torch bulb slowly fades out.
The exception to this is when fields are massively flooded with water to maintain pressure (and therefore production). Saudi Arabia is best known for doing this on a very large scale despite it being publicly documented by Saudi Aramco over 2 decades ago that these high production rates risked permanent field damage. (So don't be surprised to see a surprise "reason" why Saudi Arabia cuts oil exports sometime in the next few years - it'll probably be presented as a political matter rather than a geological one). With horizontal maximum contact wells and a steadily rising water level (since the oil floats on water) the production carries on with little above ground evidence as to the situation.
It's just like how a hot water cylinder works - hot water floats on cold (really, it does, cold goes in the bottom and pushes hot out the top. The hot is floating on top of the cold with only a small "mixing layer"). So you stand in the shower blissfully unaware that over the course of a minute or so you are about to run out of hot water.
It's the same with water flooded oil fields. It all carries on flat out until the wells start flowing water and it's game over. Now, if there are a few thousand wells drilled into a reservoir (as there are in some of the Saudi fields) then they wont all die at once. But from a big picture perspective they will die pretty darn quick...
But it's not just individual fields that are a problem. It's happened to whole countries where production rises, peakes and then relentlessly falls. Even the USA with literally half a MILLION producing wells and the best technology couldn't beat it. The oil price spikes of the 1970's led to more drilling and LESS production. Nature just doesn't respond to what happens with prices!
The real concern now is about a global peak. Worldwide light oil production seems to have peaked with declines in recent years. Non-OPEC production was wobbly BEFORE Katrina. Even OPEC was flat out and production actually went down a bit due to trouble in Iraq and Nigeria. Sure, there's more heavy oil but increasingly that's not enough to offset the declines of light and medium grades and refineries generally can't process it anyway.
But why can't we just pump harder? It's not that simple unfortunately. Overproduce an oil field and PERMANENT DAMAGE occurs and the end result is a lot of oil that can never be recovered. There is some evidence that the Saudi's are on the edge of doing this at present.
Go to McDonalds or similar and get yourself a "thick shake". Now, try and drink it through the straw as quickly as you could drink Coke. Can't be done because it's just far too thick - it takes most people a few minutes to suck this up the straw whereas they could drink the Coke pretty fast.
Oil is much the same. There's a limit to how fast it comes out and the heavy, thick oil that we are relying on more (now that worldwide production of light oil is falling) is even harder to get out quickly. It's like comparing cream through a straw to trying to suck peanut butter through a straw... A lot of effort for relatively little and most refineries can't process heavy oil anyway.
So what's it all mean?
Practically every oil field in the world was producing flat out BEFORE Katrina. And that was barely adequate. Now with some US production wiped out (some of the major platforms have been wrecked) the worldwide oil production has fallen.
Whilst there is still oil to be developed and more to be found, the scale is a problem. There just isn't enough new capacity coming onstream to offset the declines elsewhere as fields deplete (known as natural decline) and also to meet rising demand. Crunch time has come and the world just doesn't have a backup plan.
Build nuclear, solar, whatever. But what do we do about the next decade (at least) while it's being built? Demand is soaring and production is struggling to stay flat and will in due course start to fall. The inescapable conclusion is that there's a shortfall in supplies which means problems for the economy since it's not merely a question of price but rather it's a question of actually cutting demand.
Long term, yes, there are things that can be done. Cars with scaled-up mobile phone batteries would do away with the need for petrol provided that we have electricity (which can be produced from coal, renewables, nuclear etc). So there is hope. But they're just not going to be on the roads on a mass scale this week or even next year. The problem is one of timing between when oil becomes scarce and alternatives become practical. That's my focus here - that gap which realistically is likely to be a couple of decades or so.
And on top of all this there's issues with Iran etc. OPEC production has actually fallen a bit lately...
But what about gas? Ultimately it goes the same way. Discovery peaked in the 1970's and about half the reserves are in Russia and Iran so it's geographically concentrated just like oil which means geopolitical strife... And the UK and US are already running out of gas (production falling, demand rising just like with oil).
Realistically, gas offers the best near term replacement for oil. But unfortunatly everyone seems to think it's best used in power stations (which could easily use coal, nuclear etc) which could well leave us all rather short (to say the least) on transport fuel.
This is a highly complex topic not easily explained. Hopefully I've shed a bit of light on it here although I'm very aware that I've barely scratched the surface.
In short, don't panic. There will be SOME oil for a long time yet. But not much more than we have now and in due course much less. There are still tar sands, natural bitumen etc. But they don't come on the scale of the cheap, easily flowing light and medium grade oil that is becomming increasingly scarce.
With China and others wanting an increasing share of a shrinking pie it's unlikely to be cheap (or easy) to obtain oil. So plan accordingly.